On January 1,2012,Sandy Shores Company issued 10,000 shares of 10%,$20 par value cumulative preferred stock.In 2012 and 2013,no dividends were declared on preferred stock.In 2014,Sandy Shores had a profitable year and decided to pay dividends to stockholders of both preferred and common stock.If they have $200,000 available for dividends in 2014,how much could it pay to the common stockholders?

Question

Quizplus · Accepted Answer

The preferred stockholders are owed dividends for 2012, 2013, and 2014. Each year, the dividend is 10% of the $20 par value, which is $2 per share. For 10,000 shares, this is $20,000 per year. Over three years, this totals $60,000. Subtracting this from the $200,000 available leaves $140,000 for common stockholders.

On January 1,2012,Sandy Shores Company Issued 10,000 Shares of 10%,$20